Transcript

(Being Edited)

Speaker1: [00:00:00] Natu Myers here from Raises.com, and today I’m with Abdiel Lewis from Arch Capital, and we’re going to take a quick, deep dive into his background and some of the types of transactions and the scope of what he’s working on. And then we’re going to learn about some of the ins and outs of the capital raising space from his perspective and things that he’s learned and things that he’s accumulated along the way. So, so, yeah, we’re up. We just had an interest in talking about talking about some people that you actually met who have connections with. But before we get started, can you just tell the folks here about your background and some of the things that you’ve worked on in and where you’re coming from?

Speaker2: [00:00:51] Yeah, absolutely. So a couple couple of couple of things that I’ve been involved with involve anything from start up with on the technology side as well as real estate. But over the last 10 years, I find myself diving into Wilson more and more and then involved in syndication, both as lead partner as well as general partner. What if your investors to date have done about seven deals, three as a partner and then the remaining fours on both sides, as well as a. General partners, including from those seven deals with, exited three of them. Record breaking. I mean, we we always like to be very conservative when we project returns, but these were projected around 16 to 18 percent and we exited all three deals between nineteen and twenty one point two percent IRR. So I think our investors are very pleased indeed. They’d like to come back and invest with us overall. So the reason I mentioned syndication as well is as we do more syndication, it’s always come down to equity and capital. Every deal that we do, we need to. We need to raise equity and and take those down with my partners. And it comes to us about a year and a half ago, two years ago, how do we create a fund and then be able to leverage the fund to diversify our portfolio, but also to provide better ally on equity and better term for our investors? And some of the benefits with having a fund is allow us to invest in multiple projects throughout the southeast south southwest of the U.S. and be able to partner with operators, experienced operators we have worked with personally over the last seven to 10 years.

Speaker1: [00:03:13] That’s fantastic, and I mean, it’s pretty it’s pretty vibrant and is obviously, I mean, you’re obviously getting results for the investors. You’re talking about 19 percent. So I guess along the way along your journey here, it’s what is the number one? Because what would I say, what is the number one? In terms of your background, the number one piece of advice that you would have for somebody who is looking to number one, find investors and to get results for them to the level that you’ve been able to achieve here.

Speaker2: [00:03:45] Well, that’s a very good question, so I don’t know if there is a one thing because, you know, it’s it’s like learning to ride a bike, right? Because you’re because you’re by the bike. Does it mean that you know how to ride the bike the very first day, right? So, so it’s a process. I think the first thing I would say is understand the sector that you’re getting into. If you’re getting into real estate and you want to do syndication or you want to raise capital, then start by learning and understanding what investors are looking for when they are looking to invest in a particular project, whether that’s construction or whether that’s development or mixed use, or whether that’s acquisition of multifamily for repositioning or light value add. So these are these are the things I would look at and then understanding the terms, you know, anything from average return. What does that mean if we were to return? What does that mean? Cumulative return? What does that also mean? And and then also look at the construct of the general partners. A lot of those deals, often the numbers do not lie. But if the trust or the relationship between the general partners and the legal partners is is not trusted or is not easy to work with and have a track record and credibility, then you know, yes, you may be able to make money. But ultimately you would not have a great experience. But I think for me, I look at. The team behind the project, of course, I look at the numbers I have to analyze the numbers, I have to look at the exit strategy, the business plan. But at the end of the day, the business plan does not execute, execute itself. It’s the people behind it. So that’s also a big part of my analysis and how we move when we look at projects.

Speaker1: [00:05:59] Got it makes sense, especially when you’re talking about value add, especially. So going from there and talking about now, so what are some current either projects or initiatives that you’re working on raising capital for right now?

Speaker2: [00:06:15] So right now, over the last six months, we’ve been heads down focusing on. Two funds, so we launch a high income growth fund last month that’s one hundred million dollar fund targeted yield is 18 percent. The asset type we’re targeting is commercial mixed use multifamily real estate and then that that that fund, particularly the $100 million fund focused really on. High growth, like I mentioned, and also tax advantaged growth where we we we are raising capital and then we are partnering with Experience Sponsor. We have invested with in the past six to eight 10 years and take an equity position, as well as a GP position or co-investment, basically for a shorter way of saying that. So we’ll invest alongside of them. I will be part of the management team and then. The second piece is that with COVID, what happened in the U.S. is that around the world, most smaller boutique or smaller asset managers or operators did not have enough reserve or did not have any sensitivity analysis into the underwriting. Should something like COVID happen or unexpected like this happen and be able to weather the economic downturn and the economic occupancy? I didn’t say the economy occupancy is actually different than physical occupancy. So and I’ll explain with economic occupancy is how how much you’re collecting and rent or cap or return based on who is actually paying for the asset or the lease. Physical occupancy deal with OK, well, I may be 90 percent or 98 99 percent occupied, but 10 percent of those tenants or lease lessees are not actually able to meet the obligations.

Speaker2: [00:08:37] So therefore you have a discrepancy. So doing so, we saw an opportunity. Therefore, we create a second fund which coming online January one twenty twenty two, and that’s an impact fund. And that’s that’s impactful. Fund focus on passive income and measurable tax saving target yield is 10 percent, and that’s what percent of the workforce housing, multifamily, single family rental real estate. And the idea is a lot of those. Uh, operators or inexperienced operators there alone are in this business, and the bank will be calling those loan and they are going to be forced to sell or liquidate to exit. And this is what we call it with equity that we we are raising, we’ll be able to go in and acquire those assets. The steep discount and then put new management in place, inject some capital to reposition and continue where they left off and exit. So what that does is now we’re talking about a triple factor, whereas only we’re buying at a low discount. And also now we’re about to inject capital to turn around the asset, and we’re going to be able to exit at a higher equity multiple. We’re talking to X multiple and up. So that seemed to be another area of opportunity that we see coming up in twenty twenty two. And we wanted to take advantage of that and allow both retail and institutional, both retail and accredited investors to participate in our fund to be able to. And this but also to take an interest into this sector or project that we’re involved in.

Speaker1: [00:10:49] No, fantastic. Yeah, because the first one seems to be more about just leveraging high growth and taking advantage of the tax opportunities, and then the second one is more the management there and then looking for arbitrage there, right?

Speaker2: [00:11:03] Correct.

Speaker1: [00:11:05] Well, awesome, awesome. Yeah, and just off line as well, we’re just talking about different conferences and opportunities that you were a part of. And I mean, you are a Raises.com Member. and so how is the Raises.com membership been to you and your team?

Speaker2: [00:11:22] Very good. Very good. I remember the very first time I saw your note and then I reached out and we talked a few times and trying to do some due diligence on Raises.com. I think back then you guys had a different name and you rebranded along the way. But overall, I think that, for my co-founder, my partner here at Arch Capital and myself, I think the Raises.com has become invaluable to what we’re doing, and I’m going to explain that. You know, if we need advice, we can reach out to you or to your team. We on several instances we’ve had your team underwrite some of our deals, which is very unique and have great feedback on a project we’re working on last minute. And then on other instances, including now we’ve been able to connect with many mastermind members and have several warm introductions. And when we say warm introductions, these are direct decision makers who can actually tell us, yes, we can help, and no, we cannot help, but we can provide a referral. Those referral actually how to give us even greater ideas and also provide other structures and a way of being more creative in our way in our raise for for our funds that we did not think about prior. So overall, I think Raises.com Is truly a strategic partner, and we’re trying to take advantage of that every time we have a need or when we need to discuss different ways of structuring deals and raising capital and leveraging the back end solution you guys have as well to pull new investor profiles.

Speaker1: [00:13:33] And it’s good, and when it comes to I’ll use the term you use taken advantage because there are a lot of people that are coming to raise the bomb. Some are extramural and they’re more advanced. Some are just fresh and they’re they’ve syndicated deals. And so seen all the things that you’ve seen and experienced up to now not just raises, but just in general. What how would you advise somebody to take advantage over both the knowledge that you’ve learned and also the resources that are available in the market to actually set up their fund and raise for their fund, especially when it comes to multifamily real estate?

Speaker2: [00:14:09] Yeah, and they’ve got a question. So. So I think in the process when you join, there is a step you follow get the basics where the documents are, who to reach out to if you have questions. And then my theory is participation into those weekly calls or biweekly calls Monday and Wednesday and be able to discuss and exchange ideas. And you know, it’s almost like the hot seat. So you provide your your plan and you get grilled live. But but everybody get to see it and then see areas that you can improve, but also understand. The other set of conversation that should happen, that the partners in your organization with partners on your team should be asking and often, you know, people from raising resources that come will all chime in or the mastermind will chime in. There is a great wealth and bristled knowledge and folks available to help. So I think that would be the first thing, you know, get the basics out, understand where things are, who to reach out. And then once you get past that, then it’s a matter of getting introduced to other folks. If someone is good with, you know, debt instrument and someone else is good with equity. Equity raise or or capital raise or mayors or legal aspect of the deal, then, you know, reach out and get quickly introduced to someone versus is trying to figure, figure it out yourself and spending days in agony.

Speaker2: [00:15:59] I think one phone call, one email, you’ll get an answer. So so you know, time is very time is very fleeting, but also time is essential. So we try to manage our time the best we can and any type of investment. We acquire partners and even through this mastermind. You know what? You lack experience. You’ll find someone who has the upside or someone who has the experience, then just partner with them and and take that deals start, start where you feel comfortable. But also, I would say, start big enough where institutional institutional capital start to notice you, because that’s very important. And once you start having this conversation and building relationship with your capital, you’re able to speak the language and understanding there the mandate, then you start taking like them, then you start looking at things differently, then you start getting calls. Hey, do you have deals? We work on these deals. Let’s put our partner on on on either raising the debt or raising the equity or maybe coming on board as an asset manager. So all of that is things that you know, that you learn over time and you get gain experience as you go. But I think if you want to do shortcut is having this one on one conversation outside of those biweekly calls with members of the mastermind and also be active, you know, ask questions. No question is stupid. Just ask questions and reach out.

Speaker1: [00:17:39] Yeah, no good points, good points, especially when it comes to asking questions, because I mean, the thing is like nobody knows everything and part of the reason why consultants bring people in who don’t know everything is because if they knew everything, then they will be able to raise billions. So, you know, that’s the point of even asking questions. So that’s good advice to be taken from the community. So now we know that we know a bit about your career deals that you’ve done, deals you’re working on now. And so what’s what’s next? So the next, let’s say, in the next six, 12, twenty four months, what are you looking to achieve and how does the future look like for you now?

Speaker2: [00:18:24] Well, that’s a very good question. So so we. We’re excited about what’s what’s the next 12 months look like? So right now, we’re at 10 percent committed on on our High Income Growth Fund with the $100 million fund that we’re raising capital for it. So by Q1 of next year, we were anticipating to hit one third of the raise for that first fund. But the impact fund, what transpired is that when we launched that when we saw floods, the Impact Investing Fund and we were at a family office club event in Dallas, we were we were. I think surprise is not the right word, but I think the interest we receive was equally as it was equally the same as the high income growth interest in that fund. And so we so far have already been engaged, even with some public official in Dallas for the Impact Fund. But we will have we partner with some sort of public private partnership where we’ll be assisting in providing equity. And then we’re also looking at a model where where the fund can actually leverage existing asset that could be either leased or or or change hands over to the fund and then be part of the impact investment program that we’re looking to do as a model.

Speaker2: [00:20:05] So these are these are these are new things that we were seeing and we’re excited about. And then we also see that because we design and the structure we have for the impact fund is somewhat different than the high income growth because the higher income growth is directly from equity investors only. But the applause for the Impact Fund allows both accredited and the equity investors, meaning that retail individuals can invest, can, can invest into the fund very easily. And now they have a piece of of the a part of something bigger than themselves, which is impacting different areas, but also at the same time do well while doing good. And I think that’s that’s what we’re excited about that and see where that goes in 2020 to essentially. Well, the MSA, the MSA, when I say when I say MSA term that we use in real estate, the the the MSA specific areas in submarkets, I think is going to benefit greatly from that, and we anticipate that one to probably take off at a faster, a faster pace than the high income growth in term of what we’re doing.

Speaker1: [00:21:44] Hmm. Awesome. That seems yeah, because that seems to be more of the. That seems to be more of the long term plan because when you when you align, when you get people doing well and doing good and you know, I don’t want to divulge into the details, but. You know, because the reggae versus the rugby, there are different things and it’s more like a mini IPO. There are different opportunities there as well, right?

Speaker2: [00:22:09] Yeah. Correct. Go ahead. So, so yeah, you know. You know, yeah, like you said, we don’t want to get too much into the technicality, but otherwise we spend the entire night in talking about. Yeah, which is fine. And I enjoy this kind of conversation. But but really, it is really like a mini IPO giving, giving folks and investors a different way of of impact impacting their their their neighborhood and so on. And it provide the same return, the same tax, even more tax advantaged. If you look at where and where we are investing and what we’re doing. But essentially, you know, if you’re doing well, do good, but at the same time, make some money.

Speaker1: [00:22:58] Yeah, why not? Why not? And like a lot of deals like this do, is it shareholders almost become? Like the Queen, I don’t want to see customers, but everything seems to be aligned in terms of mission, especially when it comes to these mini IPO type setup. Correct? Yeah. And so we’re could. So I mean, if somebody wants to inquire about these opportunities or they wanted to learn more about, I guess, the types of transactions that you’re working on, how can somebody get in touch with you?

Speaker2: [00:23:30] Absolutely. So they can. Anyone can reach us and call anytime to talk to us, or we’re very open and transparent about what we do, and we’ll be happy to sit down and tell you about what our fund mandates are. But more importantly, you as the investor or you as a potential partner, we want to understand what it for you. What’s your goal? What’s your vision and what do you want to come out of? Maybe a potential investment with us, so if anyone wanted to reach out to us, they can simply go to arch capital that ventures and go to contact, and then you’ll find our my email Eloise at Archer Capital that ventures or my partner’s information is also on there. Our team was also in there, but once you go to the website, it goes over what we do. It goes over our investment opportunities as well as. An ethic you that goes in details about why invest with us and our strategy, from our mission to our experience to unique markets we’re focusing on and as well as our process of vetting projects in order to. Preserve investments, capital and so on. So I think the website is the most effective way of reaching out to us and connect with this.

Speaker1: [00:25:11] Perfect. Perfect. And with that, Abdul, I really enjoyed the conversation. Yeah, and every time we chat, there is a lot of nuggets that I get from the conversation as well. And obviously, the other members really appreciates all the insight that you’re bringing into their deals as well. So it becomes like a a feedback loop that that really everyone, everyone is benefiting from everyone else. So again, I really appreciate it. And are there any last pieces of either advice or anything that you’d like to share to the community overall as we go?

Speaker2: [00:25:44] Yeah. Before I go. Definitely, I think, you know, appreciate your time. Thanks for bringing me on. And we would like feedback if you guys wanted to let us know what you think works on our website or what we’re working on. We are open to feedback like, like I said, 100 percent transparent, but also do not hesitate to reach out and a lot of folks reach out on the backend and online, and that’s fine. So I’m pretty much on all the medium available as far as this group communication. So. And if you don’t, if you don’t hear from me, I promise you guys that you’ll hear back from me within 24 hours. I always tell people that twenty four within 24 hours, you’ll hear from me. I’m either up in the air, but or are flying somewhere or about tune in somewhere, but definitely we’ll reach out and then start having a conversation and go from there.

Speaker1: [00:26:49] Awesome, awesome. So let’s do good and do well. So this is arts capital. This is fabulous. And we really enjoyed this one. Thank you so much.

Speaker2: [00:26:59] Likewise, thanks. Sure.